On the Verge of Transformation: India corporate real Estate trends 2013

On the Verge of Transformation India Corporate Real Estate Trends 2013

2 India Corporate Real Estate Trends 2013

In addition, companies in India encounter numerous challenges, such as a complex culture and lack of transparency, when building their CRE platforms. How to overcome both internal and external obstacles and how to be better prepared to respond to the escalating strategic demands will be the questions critical for CRE leaders operating in India to address over the next few years.

We sincerely thank those of you who shared your thoughts and perspectives. Your input has proved invaluable in drawing a clear picture of today’s opportunities and limitations for the CRE function in India. These survey findings reinforce our conviction that CRE in India is on the verge of transforming into a more empowered and strategic function.

IntroductionWe are delighted to introduce the first India edition of Jones Lang LaSalle’s biennial Global Corporate Real Estate Trends report, which provides powerful insights into the current state and future direction of corporate real estate (CRE). This report analyses the responses received from India against those received from Asia, as well as our global responses.

Real estate is booming in India. Both Indian and Western companies are seeking to capitalise on economic growth, and we now see them optimally managing their real estate portfolios to contain costs and enhance workplace productivity. CRE leaders in India are demonstrating a more strategic mindset and have started to invest in transforming the CRE function to align better with business needs in a fast-changing environment. This, in turn, is increasing the complexity of the demands on CRE leaders.

Yash KapilaManaging Director, Corporate Solutions and Head of Integrated Facilities Management, India [email protected]

Jones Lang LaSalle 3

Executive SummaryCRE in India has started to transform. Increased exposure to the C-suite, more integrated collaboration with other functions and a strategic outsourcing mindset indicate that the function is maturing and preparing to play a more significant role in corporate agendas.

However, the CRE platform is missing a few key elements, without which the performance of CRE teams may be compromised. Limited availability of trained CRE professionals, a lack of real estate experience from procurement teams in selecting the right strategic partners, limited analytical tools and the underinvestment in workplace transformation projects are some of the constraints that put the CRE function at risk of underperforming.

With increasing pressures and demands from senior leadership—on both tactical and strategic levels—CRE teams will need to reconfigure their structure, resources and aptitude toward more strategic practices. Fostering workplace productivity is paramount in proving the strategic value of the CRE function. With a multifaceted scope that includes employees, workplace, business and real estate asset productivity, workplace transformation is arguably the most crucial part of the CRE agenda.

Yet, without a strong operational platform, there is a risk that CRE teams may underperform and reduce the value add that they can contribute to the broader business. Western companies operating in India that represent the bulk of our survey respondents are slightly ahead of the game. At the same time, domestic Indian companies realise that they need to transform their CRE function if it is to support corporate competitiveness. The task will not be made easier by the remarkable portfolio growth expected in India and in other growth markets that are often not the most transparent.

• The shortage of CRE talent and a lack of dedicated educational programs hinder CRE upskilling and development.

• A lack of effective data and analytics capabilities deprives CRE from accurate and up-to-date real estate portfolio information.

• Insufficient investment capital is an obstacle to successful workplace transformation projects.

• Complexity arising from cultural diversity is one of the most limiting factors in driving workplace transformation.

• When unfamiliar with purchasing CRE services, decision makers risk missing out on the value of external partnerships.

• CRE teams do not feel fully equipped to meet the increasing demands from the C-suite. Faced with enhanced expectations, CRE teams risk underdelivering.

• Expected CRE attributes, such as an understanding of broader business, innovation and stakeholder management outside CRE, necessitate more elaborate operational structures.

• In India, more than in most countries, enhancing workplace productivity is a strategic priority and calls for more commitment from CRE teams.

• Rapid real estate portfolio growth requires CRE teams to be ready to respond to business expansion.

Three key trends identified for CRE in India

• Direct reporting lines to the C-suite promote a closer alignment with business strategy.

• Working with other corporate functions starts to be more collaborative.

• India’s business process outsourcing (BPO) culture nurtures the readiness to adopt outsourcing models and solutions.

Strategic mindset is paving the way for CRE transformation in India1 Internal limitations and

constraints are holding back faster progress2 Upgraded CRE function

needed to meet increasing strategic demands3


1Strategic mindset is paving the way for CRE transformation in IndiaIndia is one of the countries where the CRE function has started to evolve and mature, suggesting a faster transformation when compared with global responses to our survey. Although most surveyed companies are Western corporations operating in India and appear to have taken the lead in this transformation, Indian companies have inherent elements that will enable them to move rapidly. With one of the best track records in the BPO industry, hosting multinationals from a large array of countries and sectors, and with a burgeoning real estate market, India provides a favourable environment for the development of a strategic mindset by CRE leaders.


In 47%of companies in India,

the global head of CRE resides in a dedicated CRE

department, versus 39% globally

91%of CRE heads in India

report to the C-suite versus the global average of 58%

72%of respondents in India expect

CRE strategy to be entirely aligned with the broader business

strategy in three years’ time, in line with the global average (72%), but well ahead of their

Asian peers (55%)

In line with the global trend, finance is currently the function

most integrated with CRE in India,

Shared services type of collaboration between CRE and HR

is currently lagging. This is expected to increase by

47%of respondents in India report

a shared services type of integration between CRE and IT

functions, ahead of the global and Asia averages (31% and

30%, respectively)

57%of respondents in India say

their outsourcing preferences lean toward strategic

relationships based on value, well ahead of the global response of only 30%

40%in the next three years—a huge leap, although not as dramatic as globally

(67%) and in Asia (71%)

with 53% of respondents reporting a shared services type of

integration, versus 38% in Asia


An overwhelming majority (91%) of CRE heads in India report to the C-suite1 , with the remaining 9% reporting to the managerial level (Fig. 1). This reporting line is significantly more elevated than in many countries across Asia and the world, in which reporting structures are more likely to be related to managerial and executive levels. To some extent, this can be explained by the fact that a number of India-based CRE executives have a double reporting line to both local C-suite and global CRE department.

Figure 1: Global CRE heads’ reporting lines

Question: To what level of the organisation does the global head of CRE currently report?

Note: Totals may not equal to 100% due to the exclusion of ‘Other’ responses.

Hard-line reporting to the C-suite strengthens CRE’s strategic alignment

Proximity to C-suite executives provides the CRE function more visibility to business drivers and challenges, enhances communication and facilitates a better understanding of corporate directions and goals. Currently, over half of India-based respondents report that CRE strategy is entirely aligned with the broader business strategy (Fig. 2). This score is the highest in Asia, and it is expected to grow even further to reach 72% in three years’ time.

Figure 2: Alignment of CRE strategy with broader business strategies

Question: To what extent is your CRE strategy aligned to your company’s broader business strategies/corporate goals, today and in three years’ time?

Executive levelManagerial levelC-suite Operational level

9%

91%

India

59%

23%13%

3%Asia

58%

26%14%

Global

Moderately aligned

Minimally aligned

Not aligned

Entirely aligned

Not aware of corporate goals

36%19%

58%72%

0%3%

3%3%3%3%

In three years’ timeToday

1 The C-suite is primarily represented by the Chief Executive Officer (CEO), the Chief Operating Officer (COO) or the Chief Financial Officer (CFO) throughout this report.


Question: Within what department does the global head of CRE reside?

With some exception, having a dedicated CRE department is commonly considered a sign of maturity for the CRE function in developed markets. Today in India, almost half of those surveyed have created a dedicated department to cater to their CRE needs (Fig. 3). This is closer to the findings in developed countries than those in emerging markets. This can be explained by the large proportion of multinationals in the survey that tend to replicate global CRE structures within their India operations.

Figure 3: Global CRE head’s department

While gaining more autonomy and recognition, CRE needs to proactively work with other functions to lead collaborative efforts

11% Finance 47% Dedicated CRE department

Supply chain and logistics3%

Administration/Shared services8%

Corporate office/General management22%

6% OtherNo global head of CRE

3%

Another area where CRE in India is quickly changing is the best practice of cross-functional collaboration (Fig. 4). Here, collaboration has to be understood in a broad sense, ranging from reactive ad hoc, project-based teamwork, to more proactive and integrated practices. Closer relationships with the C-suite, as illustrated by reporting lines, is an important factor facilitating cross-functional partnerships.

• Among all countries, it is in India that IT is most integrated with CRE, with 47% of respondents already having a shared services type of integration, and another 25% collaborating on an ad hoc basis. Being one step ahead, there is less pressure to integrate further. Therefore, there will be slower progress in this regard in India as compared to most countries around the world.

• Currently the most integrated function globally, finance has been at the forefront of collaboration with CRE in India as well. The majority (53%) of CRE executives in India report shared services type of integration with finance, and 10% expect this to increase three years from now.

• HR is the least integrated with CRE among the three functions analysed in the survey. Yet, it is expected to demonstrate the biggest leap (a 40% increase) toward shared services type of integration in three years’ time, still somewhat slower than the global and regional trends.


The development of shared services models over the medium term presents CRE leaders with a unique opportunity to lead change. Rather than resisting a perceived loss of influence or specialisation, CRE leaders should embrace the next generation of collaboration structures as the vehicles for transforming their organisations. We believe CRE teams have the ability to take a strong leadership role in these new configurations in order to establish creative and productive workplaces. In adopting a position as a company-wide workplace change agent rather than a tactical specialist, CRE will extend its relevance and mitigate any risks of becoming marginalised.

Question: How would you describe the collaboration of CRE with the IT, finance and HR functions respectively today and in three years’ time?

Note: Totals may not equal 100% due to rounding.

Figure 4: Collaboration of CRE with other support functions

In three years’ timeToday

47%

31%25%

47% 0%

19%25%

3%3%

IT

Shared services integration

Ad hoc/project basis

Only between functional heads

None/hardly any interactions

58%53%

22%28%

17%17%

3%3%

Finance





10%

39%39%39%

28%

28%19%

3%6%

HR





40%


Question: Please rate your current attitude toward outsourcing on a scale of 1–5 where 1 means outsourcing represents a tactical transaction, mainly with the lowest cost supplier, and 5 means outsourcing represents a strategic relationship.


BPO has permeated India’s business culture and is influencing the way companies operate their CRE in the country. In addition to being a key segment of the economy, outsourcing is becoming a more common solution in corporate India, as today’s management practices emphasise the need to focus on core competences. Consequently, outsourcing the delivery of CRE services to external partners has become an accepted—or, at the very least, an acceptable—option.

Survey respondents in India are showing the most strategic attitude toward outsourcing among all regions. The majority (57%) of respondents identify their outsourcing intention as a strategic relationship based on value; very few (3%) see it as a tactical transaction based on cost (Fig. 5). Our interpretation of these answers must take into account the fact that our sample base is not averse to outsourcing (those we surveyed are either our clients or companies we are in discussion with). Nonetheless, survey responses reflect a willingness of companies in India to outsource part or all of their CRE services, even though this potential is not always realised when it comes to actual implementation. This shows a clear trend: CRE outsourcing rapidly becoming a wider-spread practice across more companies and sectors. With this level of maturity, India can be trusted to be one of the first among emerging markets to create new outsourcing models and solutions.

Figure 5: Current attitudes toward outsourcing

India’s BPO culture helps to promote outsourced CRE solutions

3%3% 26% 11%Outsourcing

represents a tactical transaction, mainly

with the lowest cost supplier

Outsourcing represents a strategic relationship, where I assess longer-term

value add with a partner

57%

India

Asia

8%8%

9% 21% 33%Outsourcing

represents a strategic relationship, where I assess longer-term


30%

Global

Outsourcing represents a tactical transaction, mainly


6%

18% 29%Outsourcing

represents a strategic relationship, where I assess longer-term


38%Outsourcing

represents a tactical transaction, mainly



Overall, outsourcing behaviour in India is advanced compared with other countries. More complex services are now being outsourced in India (Fig. 6), reflecting the strategic mindset of CRE leaders and the existing in-house capability challenges.

• Requiring temporary resources, project management, design and build-out are currently the most easily outsourced services, with almost half of companies fully outsourcing them to external partners, and only 6% keeping them fully in-house. The delivery of these services is expected to shift to a mixed outsourcing model in the next three years.

• Property management as well as portfolio and facilities management are the next most outsourced CRE services in India. Around a third fully outsource these services, the rest opting for a hybrid service delivery combining in-house and outsourced solutions.

• Transaction services are less outsourced in India. Corporate leaders prefer to have control by keeping them in-house, relying more on established relationships with developers. However, as a larger number of Indian companies expand into less familiar markets (where they don’t have connections), they will be more prone to entrust these functions to service partners. Transaction services outsourcing is expected to pick up in India, with just above a third of respondents anticipating to fully outsource transaction services in three years’ time.


Figure 6: Outsourcing activity by service line, today and three years from now

Question: How would you best describe the current delivery of the following CRE services, where 5 stands for fully outsourced and 1 for fully in-house?


Project management/build-out/design6% 21% 48%18%

0%

18%12% 30% 18%22%14%11% 26% 22%28%

6% 18% 36%39%

Portfolio and facilities management6%9% 26% 29%29%

14%21% 22% 22%21%17%25% 25% 13%19%

Transaction services

9%17% 26% 26%23%11%11% 11% 34%31%

15%22% 27% 15%21%14%18% 22% 23 %23%

Portfolio strategy

19%44%52%

32%42%

22%12% 32% 9%

12% 21% 12%

20% 5%11%15% 3%8%

15%12%

Property management

6%6%16%6%

12%26% 20% 23%19%15%34% 18% 18%16%

12% 41%35%19% 34%25%

9%Energy and sustainability services

17%

10%

28%18% 30%27%

13% 29% 18%23%

26%19% 23%

19% 24% 11%17%15%9%

Lease administration

11%31% 12% 28%19%12%42% 14% 19%13%

26% 15% 29%24%9%33% 24% 21%12%

6%

23%

6%

6%3% 15% 38%38%

India in three years' time

Global in three years' time

Global today

India today

Fully outsourced

43Fully-in-house

2


2

On average, there is a ratio of

one CRE employee

to 4,563full-time employees in companies in India, as

compared to 1:4,000 globally

In line with global responses,

75%of companies in India that

have improved their ability to extract real estate metrics did so through data collection by

the CRE team

of respondents indicate that procurement teams are involved in CRE affairs on a

permanent basis; this is more than globally or in Asia (36%

and 40%, respectively)

57%

44% in India consider the lack of

effective data and analytics to be the most important constraint hindering CRE from enhancing itself as a strategic value add; this is more than the rest of

the world (34% globally, 40% in Asia)

in India have improved their ability to extract real estate

metrics due to purchase and population of database systems; this is significantly

lower than global (32%) and Asia (23%) responses

Only 3%

Internal limitations and constraints are holding back faster progressWhile the CRE function in India is quite advanced in terms of thinking and approach, implementation is still trailing. Talent and technology caps are preventing CRE from reaching its full potential. Companies in India are missing out when it comes to developing internal knowledge and skills, and many lack adequate real estate analytical tools and systems to draw insights about portfolio efficiency and forecast performance. Furthermore, there is a lack of support, in terms of investment capital as well as top-down sponsorship, to deploy much needed workplace transformation programs. In addition, when the procurement teams involved in CRE decision making are not CRE savvy, their contribution can end up being counterproductive.


Talent caps On average, our survey shows a ratio of one CRE employee per 4,563 full-time employees in companies in India (Fig. 7). This ratio indicates smaller in-house CRE teams in India than in most developed countries. In Australia, for example, the ratio is one CRE employee per 1,100 full-time employees (FTE). This can either indicate that the CRE function in India is more outsourced, or that CRE teams are understaffed.

The professionalisation of CRE is just starting to gain momentum. Companies in India suffer from a shortage of trained CRE professionals, mainly because of the lack of formal education in the real estate sector. In fact, there is no well-established community of real estate academics in India. Apart from short-term courses offered by industry bodies such as the Royal Institute of Chartered Surveyors (RICS) and a ‘Master of Corporate Real Estate’ (MCR) degree recently launched by CoreNet Global, no full-time program is preparing students to assume CRE leadership positions.

Most real estate programs are likely to deal with infrastructure and construction, but often miss CRE subjects such as leasing or portfolio management. When self-taught or being trained on the job, CRE executives often gain top-notch capabilities, but run the risk of being stuck in a tactical professional stage, not realising that they, or their teams, need upskilling to progress. Working with global external partners who bring in best practices from around the globe is one way to unlock their careers and move on to the next, more strategic dimension of CRE.

Figure 7: CRE to FTE ratio breakdown in India-based companies

Question: What is the size (number of full-time equivalent employees) of your CRE team globally? Approximately how many employees does your organisation have globally?

3% < 1:100

8% 1:101-1:200

1:201-1:50019%1:1,001-1:500014%

39% 1:501-1:1,000

17%> 1:5,000


Even though collecting data may not be a serious issue, extracting value out of this data and automating the process represent a challenge (Fig. 9). CRE teams in India rely more on manual data collection rather than on systems and technology.

When asked what has driven the improvement in extracting real estate metrics, very few respondents in India mentioned ‘commitment to spend on data collection and systems’ and only one respondent indicated ‘purchase and population of database system’ (Fig. 10). In contrast, a total 70% of respondents globally attributed the improvement in extracting real estate metrics to investment in and implementation of data analytics systems.

Figure 9: Ability to extract real estate metrics at facility and portfolio levels

Question: How would you rate your current ability to extract real estate metrics (e.g., space held, costs, vacancy) on demand?


Information is power CRE in India is challenged with inefficiency in providing detailed, accurate and timely real estate data. This undermines CRE’s strategic promise, as no reliable analysis can be conducted if real estate cannot be properly measured, valued and forecast. Respondents in India rank the lack of effective data and analytics as the first constraint hindering CRE from demonstrating its business value (Fig. 8). This is unique compared with other countries, where financial constraints are seen as the most important.

Figure 8: Constraints hindering CRE teams from demonstrating the value they contribute to the business

Question: In your opinion, what are the top two constraints that are hindering CRE from enhancing itself as a strategic value add to your organisation?

Note: ‘Others’ include comments about organisational culture and management and quality of manpower.

Portfolio level Facility level

39%31%

44%56%

We have everything we need

Adequate capability

17%11%Limited capability

0%3%

No capability

India Global

Lack of effective data and analytics to measure value

Financial constraints

Lack of sustained/ consistent C-suite commitment

44%34%

42%48%

31%32%

Fragmented or decentralised team

22%27%

Internal skill sets/ knowledge

14%26%

Lack of technology 11%8%

Poor vendor relationships

8%6%

Others 28%19%


Figure 10: Improvement in ability to extract real estate metrics, and drivers of this improvement

Question: Has your ability to extract real estate metrics improved since 2010? What do you think has driven this improvement?

Note: Respondents were able to select multiple responses for the second part of the question.

Question: What technological tools would most enhance your performance as a CRE professional? Please rank the top three tools, where 1 is the tool that most enhances your performance.

Building analytical tools and systems can fill the gap and make data analytics possible. According to India respondents, occupancy planning and financial modelling tools are the technological apparatus most expected to enhance the performance of CRE teams (Fig. 11). However, building or acquiring these tools requires investment that is not always readily available—financial constraints rank as the second most limiting factor in CRE evolution (refer back to Fig. 8).

Figure 11: Technological tools enhancing performance of CRE professionals

Occupancy planning data

Financial modelling

Portfolio dashboards

Rental benchmarking

Lease management

Retail network planning

Electronic document repository

17%47% 19%19%25% 11%

25%14% 17%14%8% 14%

11%3% 25%3%3%3%

11%11%Rank 1 Rank 2 Rank 3

11% No

89% Yes

Data collection by the CRE team

Commitment to spend on data collection and systems

Outsourcing of lease administration to service provider

75%25%

22%Purchase and population of a

database system 3%Others 9%


Lack of support for workplace transformation projects is putting CRE reputation and positioning at risk

Workplace transformation projects offer CRE a unique opportunity to demonstrate the value that the function can contribute to the business. However, a lack of support often represents an obstacle to the successful completion of these complex projects.

A lack of investment capital is consistently appearing as the most limiting factor in driving workplace transformation across the globe. Yet, this is not the only critical factor for driving workplace transformation in India (Fig. 12). Unlike in any other country, complexity arising from cultural diversity is just as important in the Indian context. An identical proportion (22%) of respondents in India stresses the need for investment capital and points out cultural diversity as a limiting factor in workplace transformation.

This ranking derives from the inherent cultural diversity in the country, including an astounding variety of religions, languages and cultures. Accommodating diversity in the workplace is challenging, especially while at the same time companies need to create productive and coherent spaces.

Figure 12: Most limiting factors in driving workplace transformation

Question: : In your organisation, what is the single most limiting factor in driving workplace transformation? Note: Totals may not equal 100% due to the inclusion of the most limiting factors only.

India Global

Lack of investment capital 22%22%

Complexity arising from cultural diversity

22%7%Employee resistance 14%

14%Lack of continuing

C-suite sponsorship 7%8%

Lack of management engagement

8%10%

Difficulty to build a compelling business case

6%5%

Diffiiculty to change management styles

6%15%

Others 6%6%

None 8%4%


Involved on a permanent basis

Involved on an ad hoc basis

No internal procurement team

Procurement is not involved

Use external procurement consultants

Other

India

57%

14%20%

0%0%

9%

Global

36%33%23%

3% 3% 2%

40%

25%25%

4% 2% 3%Asia

High involvement of procurement

The role of procurement in CRE buying decisions in India cannot be underestimated. Over half (57%) of respondents in India indicate that procurement teams are involved on a permanent basis, and 14% mention that procurement is involved on an ad hoc basis (Fig. 13). This engagement is much more active when compared to global responses, in which permanent involvement is only at 36%. One of the explanations for the remarkable level of involvement of procurement in India is the need to ensure more transparency and better governance in corporate processes. In 2011, India ratified the United Nations Convention Against Corruption (UNCAC) and, in 2012, the country introduced the Public Procurement Bill. In the wake of these legislative changes, corporations in India have put a special effort into developing policies and procurement guidelines.

Figure 13: Procurement teams’ involvement in CRE worldwide

Question: Is your internal procurement team actively involved in CRE?Note: Totals may not equal 100% due to rounding.

There is a lot that CRE teams can gain from procurement support in terms of transparency, supplier selection and vendor management. However, the active involvement of procurement may not always be beneficial for CRE. Respondents in India believe that among the procurement teams involved in CRE, 60% have limited knowledge about what it takes to secure quality real estate services (Fig. 14). Unchecked and ad hoc involvement of procurement teams may not yield the desired result when it comes to CRE services outsourcing.

Figure 14: Degree of involvement of procurement teams in CRE in India

Question: How knowledgeable is your internal procurement team about CRE? (Those who responded that procurement is involved on a permanent or ad hoc basis.)

Knowledgeable about CRE

40%

Limited knowledge of CRE

60%


3

78%indicate that demands to enhance the productivity of the real estate

portfolio are increasing; again, this is more than globally and in Asia

(68% and 70%, respectively)

33%perceive real estate market

transparency as the greatest challenge in emerging markets; this is considerably more than

the global data and in Asia (19% and 26%, respectively)

Upgraded CRE function needed to meet increasing strategic demandsThe perceived internal limitations and constraints make CRE teams in India less confident of being equipped to deliver all that is expected from them. At the same time, CRE teams in India are aware that the senior leadership demands placed on them will only keep increasing in both tactical and strategic terms. Expectations to improve productivity, a factor that ranks higher in India than the global average, are moving beyond the workplace to include people, business and asset productivity. Portfolios are expanding in India and beyond borders, often in growth markets that lack transparency.

In line with the low global response,

only 28%of respondents in India believe that they are well equipped to

address all the demands of senior leadership; only 16% feel well

equipped in Asia

In line with the low global response,

only 28%of respondents in India believe that they are well equipped to

address all the demands of senior leadership; only 16% feel well

equipped in Asia

92%report more demands to increase the utilisation of existing buildings in the portfolio; this is significantly

more than globally and in Asia (74% and 78%, respectively)

80%of respondents anticipate

workplace quality to increase in the next three years, slightly higher than

globally (73%)

42%

71%

of CRE executives worldwide expect to expand their real estate

portfolios in India, and 4% expect to reduce it;

89%of organisations in India have high expectations about CRE

improving workplace productivity, this is more than the global

average (72%)

of India-based respondents expect to further increase

their portfolio in India, and 8% expect to decrease it


Constraints and limitations described in the previous pages have a significant impact on CRE teams’ performance and result in a low proportion (28%) of CRE executives feeling well equipped to meet all demands being placed upon them (Fig. 15).

Figure 15: CRE leaders’ ability to meet demands of senior leadership

Faced with enhanced expectations, CRE teams in India run the risk of underperforming

Question: How are the demands of senior leadership/C-suite on the CRE team changing in the following areas? (Those who responded that demands are increasing.)

Question: How well equipped do you feel to meet these senior leadership demands?

The concern they express will intensify further if nothing changes, as C-suite expectations are increasing in number and complexity. More and more, senior leadership demands are not only tactical, but also strategic. CRE teams are being solicited to impact and add value to a wider range of strategic agenda items. This observation is even more relevant in India, where our survey findings demonstrate that local demands are increasing faster than the global average (Fig. 16).

• ‘Increasing the utilisation of existing buildings in the portfolio’ is the demand gaining more traction in India, where 92% report an increase in demand.

• ‘Reducing direct and run costs’ is the next most increasing demand in India, in line with global and regional trends.

• ‘Getting clear on the portfolio size and opportunities’ is requested to a much higher degree in India compared with the global average. This highlights the importance of data and analytics when it comes to a company’s leadership, and probably indicates that, currently, real estate data is not being effectively used to evaluate portfolio size and opportunities.

Figure 16: Tactical demands being placed on CRE teams

28%69%3%

Ill equipped to meet the demands

Can meet most demands

Well equipped to meet all demands

92% 74%Increasing the utilisation of existing buildings in the portfolio

India Global

88% 73%Reducing the run costs of the real estate portfolio

86% 75%Reducing direct real estate costs

83% 57%Getting clear on the portfolio size and opportunities via data

77% 63%Limiting exposure to future real estate costs

71% 64%Challenging the business on its presumed space needs

49% 49%Reducing the size of the portfolio

37% 28%Running own vs. lease assessments

23% 19%Increasing the size of the portfolio


Continued global economic volatility has led senior leaders to place an additional set of strategic demands on CRE (Fig. 17), in particular, around the transformation of real estate portfolios to enhance asset, workplace and worker productivity.

• Enhancing real estate portfolio productivity is considered to be the most pressing demand by 78% of respondents in India. This now standard requirement in companies all over the world is nonetheless a rather complex task for CRE, as it requires combining the multiple dimensions of workplaces (cultural, technological, etc.) and a smooth collaboration with other support functions.

• Presenting scenarios and solutions to the business on demand is becoming more important for strategic decision making, even though CRE teams in India might have limited internal resources and lack confidence in their contribution to achievement of corporate goals.

• Holding CRE accountable for driving the sustainability agenda is more frequent in India than in most other countries. This may be due to an overall move toward more transparency and sustainability across public and private sectors in India. While companies around the world gradually embrace the importance of real estate in their sustainability agendas, India respondents have already started to include it in their corporate strategy.

• Another strategic demand with particular importance in India is attracting and retaining talent. With multinational and domestic companies alike competing for the same high-calibre candidates, senior leadership insists on promoting attractive workplaces to retain top performers and better attract potential talent.

Figure 17: Strategic demands being placed on CRE teams

Question: How are the demands of senior leadership/C-suite on the CRE team changing in the following areas? (Those who responded that demands are increasing.)

78% 68%Enhancing productivity of the real estate portfolio

India Global

74% 65%Presenting scenarios and solutions to the business on demand

67% 54%Driving the sustainability agenda

67% 65%Transforming the quality of the portfolio/workplace

63% 56%Bringing more flexibility to the leasehold portfolio

63% 46%Attracting and retaining talent

50% 46%Delivering a platform for growth in select markets

44% 55%Enabling remote or mobile working

44% 53%Aligning CRE with business drivers and functional areas


Anticipating demands will help CRE leaders to design an operational structure that is equipped with the relevant tools and staffed with adequate skills, ultimately enabling an optimised service delivery and ensuring the recognition of the strategic value of CRE.

CRE leaders should pay particular attention to specific attributes that have the potential to elevate the CRE function in India (Fig. 18). Having business acumen and an understanding of the broader business, being focussed on innovation, forward thinking and efficient in stakeholder management outside CRE are some of the highest-ranked attributes that organisations in India think CRE should possess. Most are non-traditional real estate competencies, meaning skills development is a critical component in meeting these expectations.

Figure 18: Attributes ranked the most important for CRE

Question: : Please select the three most important attributes to your organisation by placing ‘1’ next to the most important, ‘2’ next to the second most important, and ‘3’ next to the third most important.

14%22% 8%

11%19% 17%

14%17% 19%

11%17% 8%

Business acumen/ understanding

of broader business

Focus on innovation

Forward thinking/ challenging status quo

Efficient stakeholder management outside CRE

14%8% 11%Improving CRE team communication/

relationship skills

11%8% 11%Providing data and insights

6% 3%8%Improving internal reputation of CRE

11%17%Presenting real estate options and scenarios

11%3%Adding new skills (e.g., change management, financial acumen etc.)

Rank 1 Rank 2 Rank 3

Upgraded skills are required to meet increased expectations


Workplace transformation is the key to unlocking productivity and optimising portfolios

Boosting productivity is a strategic priority for companies across the globe. While it appeared as an emerging trend for best-in-class workplace strategy in our Global CRE Survey 2011, it is now highly expected and is moving beyond the workplace to include people, business and asset productivity.

In India, the proportion of respondents reporting high productivity expectations is greater than the global average. Workplace productivity is the outcome most expected from CRE in India, with 89% of respondents indicating high expectation (Fig.19). Improving people productivity is highly expected by 75% of respondents in India. These expectations could be explained by the high concentration of financial services and technology companies in India that traditionally put more emphasis on workplace and people productivity, as well as by the dominance of larger companies (those having over 100,000 employees) in our India sample base.

Figure 19: Company expectations of productivity outcomes from CRE

Question: : What productivity outcomes does your organisation expect the CRE function to deliver? (Those who responded that expectations to deliver in these areas are ‘high’.)

Over the past three years, the workplaces of India-based companies have undergone significant transformation. Their portfolios have been increasing in size much more than the global average (Fig. 20). Along with that, the quality of workplace (from either a design or environmental point of view) increased in 80% of surveyed companies—one of the highest rates worldwide. While the increasing quality of workplace transformation is expected to maintain its rate in the next three years, the size of portfolios will slightly decrease (in contrast to a much stronger decrease globally).

India Global

Improve workplace productivity

Improve peopleproductivity

Improve assetproductivity

89%72%75%

61%75%

47%

Improve businessproductivity

61%57%


Getting ready for portfolio growth in India and overseas

CRE transformation and platform building gain a sense of urgency when put in the perspective of a rapid increase in the size of real estate portfolios. CRE teams need to be ready and well equipped to enable business expansion both in India and in other countries.

While companies worldwide are downsizing their real estate portfolios in developed markets, most are expecting their portfolios to grow in emerging markets. India is second only to China in the net expected growth of real estate portfolios over the next three years (Fig. 21).

Figure 21: Global CRE expectations of portfolio expansion — top ten countries by net portfolio growth

Question: Over the next three years, how will your portfolio evolve in each of the following regions? Responses from global respondents related to global real estate portfolios.Note: Net portfolio growth percentages are obtained by deducting responses anticipating portfolios to decrease from responses anticipating portfolios to increase.

Question: To what extent has your global corporate workplace transformed over the last three years/will transform over the next three years?

44%

38%

31%

20%16%

13% 12% 11%8%

5%China India Brazil Russia Mexico UAE Turkey Saudi

ArabiaSouth Africa

Australia

Incr

ease

dDe

crea

sed

India - last three years

India - next three years

Global - last three years

Global - next three years

Quantity Quality Utilisation Density

69%80%80%

73%67%65%

42%

-11% -6% -6%-4%-9% -9%-14%-12%-26%

-11%-15%-9%-7%-15%

-31%-36%

48%

71%77%

68%79%

66%

51%

72%62%

Space utilisation rates have been increasing in response to demands from senior leadership and in line with the global trend. Density rates have been more varied in India, but are expected to experience significant increase in the next three years.

Figure 20: Extent of global corporate workplace transformation


Question: Over the next three years, how will your portfolio evolve in each of the following regions? (Responses from global respondents as related to India real estate portfolios.)

Globally, 42% of CRE executives expect to increase their real estate in India, and only 4% will decrease their portfolios in the next three years. The technology sector will experience the highest net increase, followed by the energy and banking sectors (Fig. 22).

Figure 22: Global CRE expectations regarding their real estate portfolio in India by sector

Increase Decrease No change

Incr

ease

dDe

crea

sed -7%

Technology Energy Banking/financial

Retail Pharma/life sciences

Consumerproducts

Government Other industries

42%

15% 12%15%

58%

45%

29%

-4% -3%-3% -2%

40%

16%16%23%

3%

44%

14%14%

41%38%

19%

-13%-12%Total

(average)

Companies based in India expect their portfolios to grow most in Asia (Map 1), with a net 63% planning to further expand in India. Most of the countries where they expect the highest portfolio growth (India, China and South East Asia) are semi-transparent markets, according to Jones Lang LaSalle’s Global Real Estate Transparency Index 2012. This resonates with our survey results that indicate real estate market transparency as the greatest challenge when operating in emerging markets (Fig. 23). Compared to the global average, where political, economic and real estate market transparency rank equally as the important challenges, real estate market transparency in India is almost twice as critical as the other two, while the lack of unified real estate standard is also perceived as a great challenge.


Map 1: Net portfolio growth anticipated by India-based companies over the next three years

Question: Over the next three years, how will your portfolio evolve in each of the following regions? (Responses from India-based respondents as related to global real estate portfolios.)

Note: Net portfolio growth percentages are obtained by deducting responses anticipating portfolios to decrease from responses anticipating portfolios to increase.

Rest of region

Country

Stability (0% Net Growth)

1%-10% Net Portfolio Growth

Negative Net Portfolio Growth (10%-1%)

11%-30% Net Portfolio Growth

30%+ Net Portfolio Growth

China53%

SEA44%

India63%

Question: In your opinion, which of the following is the single greatest challenge when expanding into developing/emerging markets?

Figure 23: Perceived greatest challenges in developing markets

India Global

Real estate market transparency

33%19%

Economictransparency

19%17%

Lack of unified real estate standards

17%7%

Political transparency

14%18%

Lack of suitable real estate offer

8%10%

Start-up costs 3%7%

Others3%

8%

None3%

14%


This report is based on answers received from 545 respondents from across 39 countries through a combination of online and telephone interviews, including trends culled from multiple responses of Indian organisations.

This respondent pool reflects a representative section of the corporate community in India, ranging from mid-tier companies to large multinational organisations. It represents a diversity of sectors where technology and financial services dominate.

Jones Lang LaSalle was supported by the market research company Kadence International in collecting, compiling and segmenting the rich research data set generated.

About the Survey

Responses by organisation size (number of employees)

6%5,001-10,000

19%10,001-50,000

17%1,001-5,000

36%More than 100,000

22%50,001-100,000

Responses by CRE team size (number of CRE employees)

17% 1-5

11%6%

6%

8%17%6%31%

26-50

51-1006-10

11-15 101-200

Over 20016-25

banking and financial services25%

technology33%

others32%

telecommunica-tion services

8%manufacturing and

industrial

11%

professional services

6%

8%consumer products

retail6%

India respondents breakdown by sector


Acknowledgements Jones Lang LaSalle gratefully acknowledges the assistance of those CRE professionals who participated in this survey. We are also grateful to Kadence International, our research partner for this project.

We welcome any feedback on the published results to continue to improve future editions and make them as meaningful as possible for our readers. If you have any comments or would like to participate in future surveys, please email [email protected].

Research for this report was conducted by Kateryna Kyryllova and Holly Yang from Jones Lang LaSalle’s Corporate Research team in Asia Pacific.

Visit www.jll.com/globalCREtrends to explore the global trends in more detail. See how CRE executives based in your region responded and compare your answers with the global survey results. Additional reports for specific countries and industry sectors will be posted to this site as they are released.

Yash KapilaManaging Director, Corporate Solutions and Head of Integrated Facilities Management, India [email protected]

Sudarshan MalpaniHead of Transaction Management and Integrated Portfolio Services, India [email protected]

Nitish BhasinManaging Director, Markets, India [email protected]

Anurag MathurCEO, Project and Development Services and Head of Emerging Businesses, India [email protected]

Manisha GroverManaging Director, Business Excellence and Head of India Corporate Account Management [email protected]

Report Contributors

About Jones Lang LaSalle IndiaJones Lang LaSalle is India’s premier and largest professional services firm specializing in real estate. With an extensive geographic footprint across 11 cities (Ahmedabad, Delhi, Mumbai, Bangalore, Pune, Chennai, Hyderabad, Kolkata, Kochi, Chandigarh and Coimbatore) and a staff strength of over 6100, the firm provides investors, developers, local corporates and multinational companies with a comprehensive range of services including research, analytics, consultancy, transactions, project and development services, integrated facility management, property and asset management, sustainability, industrial, capital markets, residential, hotels, health care, senior living, education and retail advisory. The firm was named the Best Property Consultancy in India (5 Star Winner) at the International Property Awards - Asia Pacific for 2012-13.

About Jones Lang LaSalle Corporate SolutionsA leader in the real estate outsourcing field, Jones Lang LaSalle’s Corporate Solutions business helps corporations improve productivity in the cost, efficiency and performance of their national, regional or global real estate portfolios by creating outsourcing partnerships to manage and execute a range of corporate real estate services. This service delivery capability helps corporations improve business performance, particularly as companies turn to the outsourcing of their real estate activity as a way to manage expenses and enhance profitability.

www.joneslanglasalle.co.in